Job creation depends on age, not size, of business, study says

Writing in the February 2012 Employment in New York State newsletter, Kevin Jack cites new studies that question the assumption that small business creates the bulk of new jobs. A recent study for the National Bureau of Economic Research says young firms typically create more jobs, and that mature small firms actually have cut more jobs than they created.

Business start-ups, wrote Jack, employ 3 percent of workers but created 18 percent of gross new jobs from 1984 to 2009. Start-ups, he added, accounted for all net job creation in the state over the past quarter century. Firms older than one year shed 140,000 jobs annually between 1984 and 2009, with slightly more than half the job losses coming from firms at least 11 years old.

While smaller firms do contribute to both gross and net job creation in New York, “it is their age — not their size — that matters most to explain their outsized impact on the state’s labor market,” Jack concludes.

The NBER paper, by Steven J. Davis, John Haltiwanger and Scott Schuh, is here. The newsletter with Kevin Jack’s article may be downloaded here.